Kimlun maintains RM500mil target: HLIB

NST Mon, Oct 11, 2021 11:56am - 2 years View Original


KUALA LUMPUR: Kimlun Corporation Bhd has maintained its RM500 million construction contract replenishment guidance for financial year 2021 (FY21) despite slightly less than three months remaining, Hong Leong Investment Bank Bhd (HLIB) said.

Following the company's briefing last Friday, HLIB said this was despite Kimlun only achieving a mere RM20 million in the first half (1H) and little indications of more achieved since.

It said some outstanding tenders were for hospital, infrastructure projects in Sarawak and private sector opportunities. 

"Given the time constraint, we have imputed a RM250 million assumption in FY21 which could hinge on revival of private sector jobs on reopening. 

"On the execution side, Kimlun has obtained approval from several clients to slow down construction progress in view of elevated material prices. 

"This could slow down recognition verses expectations increasing downside risks to earnings forecasts," it said in a note today.

As for the Pan Borneo Highway Sarawak (PBH) project, HLIB said progress rate was relatively unchanged from April 2021, implying difficult construction conditions due to supply chain issues in addition to restrictions.

"The management has also indicated limited timeline visibility for PBH Phase 2 tenders. As such, Kimlun has tendered for other state infrastructure projects," it said.

Meanwhile, Kimlun's outstanding manufacturing orderbook stands at RM300 million. 

HLIB said orders for the 1H came in at RM75 million, versus its assumptions of RM200 million orders in FY21.

"In terms of contract opportunities, we do expect Kimlun to continue securing various project orders from Singapore and could also secure work from the upcoming RTS (Johor Baru-Singapore Rapid Transit System). 

"Deliveries have also suffered in tandem with slower construction activities in SIngapore due to various supply chain issues. 

"We reckon current labour supply challenges will be slow to subside as mitigation is tricky amidst the ongoing virus spread," it added.

HLIB has maintained its "hold" call on Kimlun with a slightly higher target price of 85 sen from 84 sen previously.

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